Trade

Overview of Trade Sector in Indonesia:

The Highlights

The Indonesian government is preparing a strategy for boosting exports, to meet the target for economic growth of 6.1 percent next year. It is far from this year’s target, which is set at 5.1 percent. Therefore, the Indonesian Ministry of Trade must revise its strategy.

The Ministry of Trade said the goals included boosting domestic trade and exports, both in and outside the oil and gas sectors. Besides, the ministry also set a target to reduce the country’s import dependence through improving local manufacturing.

For United States, Indonesia has identified two opportunities. First, market information of furniture product. It includes product type, shape, design, color, and materials which attract American consumers. Second, fishery products.

Moreover, Indonesia is interested in penetrating France’s market for dolls and garments. Another country, Belgium, is perfect as a destination for Indonesia to export pineapple and pineapple juices, garments, wood furniture, and frozen shrimp.

Meanwhile, Indonesia has been aiming for exporting furniture and garments to markets in Denmark. For Italy, Indonesia prepares footwear and coffee. Unlike products for other countries, Indonesia exports electronic products to Hungary.

Among those eight countries, the United States is a key trading partner of Indonesia. Therefore, the latest issue on punitive trade tariffs imposition the the United States will affect Indonesia. It will affect, especially Indonesia’s rubber, electronic components, textiles and footwear.

Exporters of those products or commodity contributed 11,9 percent of Indonesia’s total non-oil exports to the United States. It equals to US$ 15.7 billion.

The Opportunities

Although recording numbers of exports to many countries, Indonesia still have to be aware. It is because the advancements in automation and digitization in developed countries has made cheap labor in Asia lose its competitive advantage.

It means that countries in Asia, which have depended on their development of labor-intensive manufacturing for exports, must be changed. Some Asian countries have managed to develop a solid manufacturing industry and become middle to high income countries.

According to the World Economic Forum (WEF) Annual Meeting 2017 in Davos, Switzerland, global trade, cross-border lending, and foreign direct investment (FDI) are expected to slow further this year. It is predicted that Asia will perceive a particularly large impact, as it has become a continent which became a key player in global trade over the past decades.

On the other hand, Indonesian Finance Minister Sri Mulyani Indrawati is optimistic. Sri Mulyani believes that Indonesia’s strong macroeconomic fundamentals will support Southeast Asia to become the largest economy. Indonesia however, she added, needs to be careful, following uncertain global conditions.

Yet, there is a chance that intra-regional trade will become more important when global trade continues to slow, amid protectionist and anti-globalization sentiments.